You can make passive income with USD Coin by lending it, and that’s one of the reasons investors buy it. There are several crypto lending programs available that will pay you interest for lending your crypto. Gemini and CoinLoan are among the platforms that support USD Coin lending and offer competitive interest rates. USD Coin is widely considered to be the safer option because of its transparency. Its management has provided reports since its launch, verifying its reserves. Tether Limited, on the other hand, didn’t provide information on its reserves for years.
USD Coin and Tether (USDT) together account for 80% of the capitalization of the global stablecoin market. If it works the way it’s supposed to work, any USD Coin you buy will be worth the same amount in one year, five years, and so on. The stablecoins have the same uses and normally keep a value of $1. However, how to find an app developer for your project and where to hire them software development each has advantages over the other, so they’re not entirely interchangeable. The most important factors for a stablecoin are transparency and trustworthiness — areas where USD Coin does a better job than most of its competitors. The year-to-date return on Bitcoin is -35% as of this writing, for example.
Meanwhile, the value of USDC has remained almost completely flat year to date. The lowest trading price that USDC has fallen to within the last 52 weeks is $0.995, a slight dip below its dollar peg. The tokenization process ensures there are reserves backing the entire supply of USD Coin. Because it uses the Ethereum blockchain, USDC transactions require Ethereum gas fees. You can buy fractions of USD Coin just like you can divide U.S. dollars into pennies.
Stablecoins aren’t guaranteed, but the transparency of USD Coin makes it one of the most secure options. U.S. lawmakers have been working on a regulatory framework for stablecoins and their issuers that could affect how they’re used. It’s worth mentioning that USD Coin follows current regulations and would likely have fewer issues with any new rules compared to other stablecoins. Circle has also partnered with two of the largest payment networks in the world and some popular payment processors. In December 2020, Circle partnered with Visa, allowing businesses on the Visa network to accept USD Coin. In July 2021, Mastercard (MA 0.76%) announced plans to incorporate USD Coin as a payment method.
It has also faced legal troubles related to its lack of transparency, with a lawsuit alleging that unbacked Tether issuances caused $1.4 trillion in damage to the crypto market. If you’re selling USD Coin, it’s the same process only in reverse. The exchange uses a smart contract to remove the USDC tokens that you’re selling from circulation, and it pays you an equivalent amount of U.S. dollars from the reserve. And when you choose to sell 1 USDC for fiat currency, the coin is “burned” when you make the transaction. Stablecoins like USDC are used differently than cryptos like Bitcoin (BTC) or Ethereum (ETH), which fluctuate in price. The sole purpose of this crypto is to provide a stable store of value, rather than provide an asset that, theoretically, appreciates in value over time.
While stablecoins like USDC have less price volatility than other cryptocurrencies, stablecoins may be subject to increased scrutiny by regulatory agencies like the U.S. There is a business behind USDC also, so it must function well for the coin to remain pegged to the dollar. In terms of functionality, U.S. dollar stablecoins essentially all offer the same thing. They aim to maintain a value of $1, and they work like any other digital currency so they can be transferred between crypto wallet addresses. It works with many ERC-20 compatible wallets, a long list of cryptocurrency exchanges, and has real-world use in global commerce and money transfers. It could also be useful as a store of value in your crypto portfolio.
- USDC is a tokenized U.S. dollar, with the value of one USDC coin pegged as close to the value of one U.S. dollar as it can get.
- In USD Coin’s case, the asset is the U.S. dollar, and one USDC is designed to maintain a value of $1.
- If that happens, a new dollar is added to the bank account behind USD Coin.
- If you’re planning to buy a U.S. dollar stablecoin, you may be wondering which one you should choose, or if there’s even a difference between them.
That’s better than many traditional savings accounts but falls short of the typical high-yield savings account. Meanwhile, USDC’s value has stayed relatively stable over its life, although there may be some short-term volatility during extreme market periods, Manoppo says. But there are challenges to having an asset’s value defined only by people’s perceptions, as demonstrated by Bitcoin’s volatile nature.
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Keep reading to understand more about USDC, including how it works and the various use cases for the digital currency. Investing in USDC would be like stashing U.S. dollars under your mattress, and your investment would never be worth more than the equivalent cash. While USDC’s value is based on the value of the U.S. dollar, Bitcoin’s value is derived from its limited supply.
Advantages and Disadvantages of USD Coin
USD Coin (USDC) is a fiat-collateralized stablecoin, meaning that USDC tokens are collateralized by fiat money like U.S. dollars. Other stablecoins types include those collateralized by a cryptocurrency, an algorithm, or a hybrid approach. Users should also be aware of the regulatory landscape surrounding digital currencies and stablecoins. Crypto experts also say that government regulations against these digital assets could have a crippling effect on the future of these assets.
USDC provides liquidity to crypto markets and is available as an asset on several major blockchain networks, such as Ethereum, Algorand (ALGO), Solana (SOL) and TRON (TRX), to name a few. To be super specific, USDC is also an ERC-20 utility token, which is standard for creating smart contracts on the Ethereum network. Stablecoins are a type of cryptocurrency whose value is pegged to another asset, such as a fiat currency, a commodity or even another crypto coin. USD Coin aims to maintain a one-to-one peg with the U.S. dollar.
The price stability of USDC contrasts sharply with the notorious price fluctuations of other cryptocurrencies like Bitcoin and Ethereum. Purchasing USD Coin won’t generate any returns for investors, as it is intended to be a stablecoin. So the advantage of this crypto is more about its usage, as there isn’t an expected price appreciation with this coin. As of May 2022, Circle announced that the company would provide weekly attestation reports. They help build trust in USDC, as they disclose the precise amount of actual funds backing the stablecoin. You can even view monthly reports of these reserve balances, including how much USDC is in circulation and its equivalent value in U.S. dollars.
Price Prediction, Forecast for next months and years
Be careful about doing this with large amounts of money, though. As mentioned earlier, crypto lending programs have failed in the past, leaving users high and dry. USD Coin has inked several major deals that could help it dramatically expand as a payment method and cryptocurrency. In September 2022, Circle web application and software architecture 101 learn interactively and Robinhood teamed up to make USD Coin the first stablecoin offered by the broker. USD Coin is built on an open-source fiat stablecoin framework developed by Centre. New USDC tokens are minted when people buy them, and they’re removed from circulation when people sell their tokens for U.S. dollars.
USD Coin was issued by Circle, a peer-to-peer payments company, and Coinbase Global (COIN 3.28%), a cryptocurrency exchange. Circle first announced plans to launch USD Coin on May 15, 2018, and raised $110 million. Although stablecoins aren’t investments, they have a variety of other uses, and you can often earn generous interest rates on them.
USD Coin maintains a fixed value of $1 per coin, and a U.S. dollar backs each USD Coin in a dedicated bank account. This makes USD Coin a popular option for holding cryptocurrency without the volatility and price risk of major coins such as Bitcoin and Ethereum. With USD Coin’s reserves, people who own it should always be able to exchange it for an equivalent amount of U.S. dollars. However, it’s important to be aware that this isn’t guaranteed. Although USD Coin acts as a digital dollar, it’s not as safe as money in a bank account.
Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The main unique feature of USD Coin is that it’s always worth $1. That’s a big difference from bitcoin cash outs arrive at 16000 atms in the uk highly volatile coins including Bitcoin, Ethereum, and Dogecoin that may see big price swings in a single day. The accounting firm Deloitte oversees these segregated accounts and provides monthly attestation reports.
To maintain USDC’s stable value equal to $1, USDC is backed by cash and short-term U.S. government bonds as collateral. For every USDC token in circulation, $1 is held in collateral. Launched in 2018 by Centre, a consortium founded by Circle and Coinbase, USD Coin was created as a regulated stablecoin that runs on blockchain technology. USD Coin is the currently the second-largest stablecoin, with a current market capitalization of $73 billion.